During the last few years, a great shift has happened. Marijuana, a plant that was frowned upon is now the mainstream trending plant. In the US alone, recreational use of Marijuana is now legal in 10 states and medical use is legal in 33 states. In most of these states, the usage of marijuana for both recreational and medical purposes was legalized post – 2010. On the basic, what this means is that the Cannabis industry is still young with lots of moneymaking opportunities for investors.
If you are an investor looking at and considering the cannabis industry as an avenue for getting returns, then this guide will help you get started with investing in the Cannabis industry.
An alternative would be attending a cannabis expo that will help you learn hand on on how you can invest in cannabis.
Basics on the Cannabis Industry
It is estimated that the Marijuana industry will add at least 20000 new jobs in the US by the year 2020. The cannabis supply chain involves many entities who are involved at every stage of the manufacturing process including farmers, packagers, and drug manufacturers. All these entities will benefit from the use and legalization of Cannabis, which is a plus for employment creation and the overall cannabis industry growth.
One of the most important ingredients in marijuana is Cannabidiol, popularly known as CBD. CBD is an important chemical that comes with many benefits enabling it to treat diseases like epilepsy and help in relieving anxiety and dealing with insomnia.
Other products that are made from marijuana include CBD oils, Cannabis flowers, and body creams and lotions.
Investing in Cannabis Stocks
In the above paragraphs, we mentioned something about the cannabis supply chain that involves several entities and companies. For an investor, one of the simplest ways to get started with cannabis investing is to invest in Cannabis stocks. Finding the best stocks is easy, you will have to look into the whole cannabis value chain and choose a company involved in a certain part of the value chain. To help you further, when looking at the involved companies, there are three groups to consider namely:
- Drug Manufacturers
The first group of companies to look at are the drug manufacturers. These companies are often the biggest in terms of both revenue and capacity as they process the cannabis grown by farmers to produce drugs, which are sold to hospitals at hefty prices. Depending on overall market stability, when you invest in the stock of a marijuana-based drug manufacturer, your chances of getting a great ROI are great.
- Marijuana Farmers
Marijuana Farmers are at the very beginning of the Cannabis Value chain. Marijuana farmers are the ones who are responsible for supplying the two other groups with the unprocessed version of marijuana for processing. Investing in a farm will offer you stability in the long term as the operational requirements of farms are not as risky as compared to those for drug manufacturers. In addition, farms often get quick returns, as there aren’t many legal bottlenecks constraining their operations.
- Ancillary Companies
The third group of companies to look into when considering investing in marijuana are the ancillary service providers. These companies get the whole industry moving through the provision of services like transportation, logistics, consulting and other essential services. These companies are less lucrative when compared to the others but still; they are sustainable over the long term and are likely going to grow together with the cannabis industry.
Tips for investing in Cannabis Stocks
Before you take your money to a broker or go for a cannabis expo, here are some tips to help you make the best decision to help you get your full money’s worth. One thing to remember is that these tips, even though they apply to the cannabis industry, can also be used for investing in other stocks.
- Put emotions aside
Emotions and investing are like fire and ice; they can never at any point go hand in hand. When wanting to invest, you should put all emotions aside. Look at every company objectively; look at the company’s numbers as well as its balance sheet and cash flow. Trading with emotions can hurt your cannabis portfolio returns.
- Think in the long-term
The Cannabis industry is here to stay. What this means is that it’s safe for you to think long term if you are considering investing in Cannabis stock. In addition, long term investing requires you to have a plan. You have to think through things like the capital you will need and your expected target return. If you have those in mind, coming to a decision and choosing the right companies to bet in will be easier.
- Know your risk tolerance
Your risk tolerance is important when it comes to your success as an investor. Investing is a risk, and your risk tolerance can influence your investing decisions either unknowingly or knowingly. If you are not familiar with stock investing, your risk tolerance can cause you to become anxious. As you learn more and more about managing the associated risks, your anxiety levels will decrease enabling you to make smart investment decisions.
Cannabis companies to consider
Here are some of the Cannabis companies you can consider investing in.
Constellation Brands. Constellation is listed on the New York Stock Exchange and is one of the largest Cannabis growers in the United States.
Innovative Industrial Partners. This company is in the Ancillary Category. It is a service provider to Cannabis growers and processors. It’s currently listed on the Zimbabwe Stock Exchange.
Other companies you could consider are Organigram Holdings, Origin House, and Kushco Holdings.
The Cannabis industry is going to follow along a bullish path for some time, which makes it a very lucrative industry to invest in. We hope this guide has given you all the information you need to get started with Cannabis Investing. If not, then you can consider going for a cannabis expo to get all the information you need on cannabis investing.